wildbird construction has the following account balances on december 31.\naccounts balances\nequipment…
wildbird construction has the following account balances on december 31.\naccounts balances\nequipment $18,000\naccounts payable 1,400\nsalaries expense 25,000\ncommon stock 11,000\nland 10,000\nnotes payable 12,000\nservice revenue 31,000\ncash 4,400\nretained earnings?\nrequired:\nuse only the appropriate accounts to prepare a balance sheet on december 31.
Answer
Explanation:
Step1: Identify asset accounts
Assets include Cash ($4,400), Land ($10,000) and Equipment ($18,000). Total assets = 4400 + 10000+18000 = $32,400.
Step2: Identify liability accounts
Liabilities are Accounts payable ($1,400) and Notes payable ($12,000). Total liabilities = 1400 + 12000=$13,400.
Step3: Use accounting equation to find retained earnings
The accounting equation is Assets = Liabilities + Stockholders' Equity. Stockholders' Equity = Common stock+Retained earnings. Let retained earnings be $x$. We know Assets = 32400, Liabilities = 13400 and Common stock = 11000. So, 32400=13400+(11000 + x). Solving for $x$: First, simplify the right - hand side: 13400+11000 + x=24400 + x. Then, 32400=24400 + x. Subtract 24400 from both sides: x = 32400 - 24400=8000.
Answer:
| Assets | Amount | Liabilities | Amount | Stockholders' Equity | Amount |
|---|---|---|---|---|---|
| Cash | $4,400 | Accounts payable | $1,400 | Common stock | $11,000 |
| Land | $10,000 | Notes payable | $12,000 | Retained earnings | $8,000 |
| Equipment | $18,000 | Total liabilities | $13,400 | Total stockholders' equity | $19,000 |
| Total assets | $32,400 | Total liabilities and stockholders' equity | $32,400 |